The process of human resource planning seeks to ensure that the right number and kinds of people will be at the right places at the right time in the future.
According to Davar, the process of human resource planning basically involves four steps:
1. Anticipating manpower needs; 2. Planning job requirements and descriptions; 3. Analysing skills to determine the nature of manpower needed; and 4. Selecting adequate sources of recruitment.
Process of Human Resource Planning: 3 Stages, 6 Steps and Top 9 Steps
Process of Human Resource Planning (3 Stages):
The process of human resource planning seeks to ensure that the right number and kinds of people will be at the right places at the right time in the future. This requires forecasting future needs, inventorying existing resources, projecting present resources into the future and comparing these projections with the forecasts, and finally planning ways to fill the identified gaps.
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In the opinion of W. S. Wickstrom, manpower planning consists of a series of activities as follows:
(i) Forecasting future ‘manpower requirements, either in terms of mathematical projections of trends in the economic environment and development in industry, or in terms of judgmental estimates based upon the specific future plans of a company;
(ii) Making an inventory of present manpower resources and assessing the extent to which these resources are employed optimally;
(iii) Anticipating manpower problems by projecting present resources into the future and comparing them with the forecast of requirements to determine their adequacy, both quantitatively and qualitatively; and
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(iv) Planning the necessary programmes requirements, selection, training, development, utilization, transfer, promotion, motivation and compensation to ensure that future manpower requirements are properly met.
According to Davar, the process of human resource planning basically involves four steps:
1. Anticipating manpower needs;
2. Planning job requirements and descriptions;
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3. Analysing skills to determine the nature of manpower needed; and
4. Selecting adequate sources of recruitment.
Another way to study this process is as follows:
The process of human resource planning may be summarized in three stages i.e.:
1. Investigating Stage:
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It is crucial since the main purpose of manpower planning is to avoid the situations of overstaffing and understating; and for this purpose a stock of existing manpower is to be assessed.
Manpower inventory refers to the assessment of the present and the potential capabilities of present employees quantitatively and qualitatively. Inventory is a term often used in relation to the counting of tangible objects such as raw materials, goods in progress, or finished product. In manpower inventory, however, the items involved are intangible.
The manpower inventory is not simply the counting of number of persons available presently, but it includes a cataloguing of present and potential abilities and aptitudes. The inventory should include young men who have good potential, even though they are not holding key positions presently, as well as present executives, because a great deal of shifting from position to position will undoubtedly occur during the future period.
Preparation of manpower inventory comprises four steps:
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(i) Determination of personnel to be inventoried;
(ii) Cataloguing of factual information on each individual;
(iii) Systematic and detailed appraisal of each individual;
(iv) Detailed study of those individuals deemed to possess potential for development.
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Studying the employee turnover is essential for estimating the future needs of the workforce. From the available stock of manpower, a discount should be allowed for employee turnover during the period of planning. Employee turnover may be caused by death, disability, dismissal, resignation, promotions, transfers, etc. The study of turnover requires a lot of experience and the records regarding work conditions, morale, job satisfaction, competitive situations, etc.
Human resource auditing is an intensive, analytical and comparative process. Audits are systematic searches that gather, compile and analyse data related to production, products, labour, and competition, etc. in depth for an extended period of time-usually a year. Most audits are designed to compare information about an individual organization with norms, standards and composite reports from other similar organizations.
Manpower audit essentially involves the issue of workforce quality, skills inventory, expected losses, and internal moves like promotions, demotions and transfers.
Examining the present quality of the work force is done through employment records and performance appraisal documents. Skills inventory contains data about, each employee’s skills, abilities, work preferences and other items of information that indicate an employee’s overall value to the organization.
The data and information required in skills inventories usually includes items like age, occupation, education, experience and skills, career places and preferences.
Information gathered through skills inventories helps in knowing “what exists in stock” and “what is needed to be added to that stock”, taking into account the capability, qualifications, experience, skill, knowledge and promotional potential of employees.
2. Forecasts and Plans:
Forecast and plans which constitute the second stage are important basic premises for manpower planning. Human resource forecasting is very similar to human resource auditing except that forecasting emphasizes the future while auditing is concerned with the present. Again, human resource auditing focuses on internal organizational adjustments whereas human resource forecasting concentrates on organizational adaptations resulting from external pressures and changes.
Forecasting of future manpower requirement, both qualitatively and quantitatively, depends upon various factors like amount of production, technological changes, supply-and-demand conditions, and career planning.
Formulating coherent forecasts and plans to determine personnel strategy for the organization is crucial part of manpower planning and there are various techniques available to assist in preparing forecasts – ranging from sophisticated statistical models to basic managerial judgement. The methods used will depend on the back-up data available, the size and nature of the organization and the degree of expertise available.
The manpower plan will normally be sub-divided on a basis similar to that outlined below:
i. Recruitment:
The number and types of employees required over the period of the plan together with details of any potential supply problems.
ii. Training:
The amount and types of training required for both new recruits and existing employees.
iii. Employee Development:
Closely linked to training, this programme must provide for projected promotions and transfers.
iv. Productivity:
Methods for maintaining or improving productivity including work methods, incentives, productivity bargaining and other methods of improving motivation.
v. Redundancy:
Specific plans regarding the number of potential redundancies and how these will be dealt with.
vi. Accommodation:
Plans for expansion, contraction or re-location including buildings, equipment and for improving working conditions.
3. Utilization and Control:
It constitutes the third stage of the process of manpower planning. Here the focus is on ensuring that the plans will materialize. Manpower control is a system for measuring achievements in terms of utilization against what was expected in order to check that things are keeping up with the expectations. Constant monitoring of information flow helps in warning the organization when forecasts or targets of utilization are going awry so that corrective action may be taken.
It has been rightly observed that manpower planning is a strategic approach to managing human resources at work. It is in practice an organized flow of information feeding a continuously updated picture of future manpower needs and availabilities through which the various aspects of manpower management (recruitment, selection, training, promotion, career development, remuneration and productivity) can be integrated into a cohesive manpower strategy linked to the economic and ethical objectives of the organization.
Human Resource Planning Process (Steps Involved):
It is usually followed in large organisations.
Steps Involved in Manpower Planning/Human Resource Planning Process:
Step # (1) Analysis of the System:
Broadly, there are two types of systems. So, the first most important step in Human Resource Planning is to analyse both systems.
(I) Close system- This type of system contains (within its boundaries) all variables, information, relationships necessary for the achievement of its goals.
(II) Open system- It interacts with the external environments. It influences and gets influenced by the factors beyond its boundaries.
Manpower planning generally makes its way in vast open-end system (the national economy) which contains a number of complicated open-end subsystems (firms, union, families and individuals). It is therefore, necessary to do a thorough analysis of the system.
System must be analysed on the basis of following aspect:
a. Goals
b. Uncontrollable variables
c. Controllable variables
Step # (2) Deciding the Time Horizon of the Plan:
a. Whether the plan will be for short-term or long-term.
b. The exact time period, however, depends upon the uncertainty prevailing in the organisation environment
c. The shorter the time span contemplated, the less variable there is in the system.
Step # (3) Forecasting Demand for Man Power:
For this, the planner must have a detailed knowledge of the company’s future achievement. The forecast is made on the assumption of a given target level.
Steps involved in projecting manpower demand:
(i) Selection of an Appropriate Basis for Calculation of Manpower Need:
For a retail store, the appropriate basis may be rupee volume of sales, whereas for a company producing steel it may be tons of steel. The required manpower must be proportional to the changes in the basis.
(ii) Calculation of Productivity Ratio:
Output per individual or productivity ratio can be calculated in a number of ways like managerial judgment, work techniques or other statistical methods. We can also copy the ratio of other concern. Suppose an organisation needs 12 persons in his office to process 360 proposals per week. This gives a productivity ratio of 30 proposals per individual per week.
(iii) Mainly Adjustments in the Productivity Ratio:
Adjustment in productivity ratio is made for likely improvement in it resulting from planned advances in technology, changes in organisational structure, training and better utilisation of human resources.
(iv) Projecting Manpower Requirements:
With the help of adjusted productivity ratio, operative manpower need for the target year is projected. Then organisation can proceed to find out the ratio between the number of operative and managerial personnel at various levels on the basis of certain assumption about span of control, nature of work, technology and historical data.
Step # (4) Forecast of Manpower Supply:
The supply of manpower can be obtained from:
(I) Internal supply forecast
(II) External supply forecast
(I) Internal Supply Forecast:
This is to be based on a study of the existing manpower resources and changes in them due to internal promotion, transfers and turnover, etc.
Markov analysis for forecasting internal supply of manpower:
Calculate probabilities of the movement of people from one job to another in the organisation or of leaving organisation.
Assume that these probabilities would remain stable. Forecast is made of future man-power supply in the organisation.
(II) External Supply Forecast:
Demand forecast and internal supply match only in exceptional circumstances.
In expanding situation – Internal supply is less than demand.
In contracting situation – Internal supply is more than demand and in this case we plan for recruitment. To plan for recruitment an external supply forecast is needed.
External supply forecast depends on population density near workplace, local employment level, current competition for labor, etc.
Step # (5) Reconciliation:
It is possible that cost implication of manpower plan is not found to be wholly compatible with the company’s finances, hence the manpower need and manpower programmes will have to be re-examined and reassessed and a suitable reconciliation with financial constraints is achieved.
Step # (6) Action Plans:
On the basis of analysis of manpower requirements, productivity and manpower costs on action plan for recruitment, redundancy, training, retention, etc., for employed is prepared
Process of Human Resource Planning:
There are four main activities involved in the HRP process:
1. Forecasting HR demand
2. Identifying sources of HR supply
3. Matching HR Demand and Supply
4. Monitoring and Control.
1. Forecasting HR Demand:
For forecasting the HR demand, the planner studies the data gathered from the analysis and investigation in order to identify, and thereby forecast, the HR demand and supply. Forecasting HR demand is a data-gathering process involving identifying the kinds of knowledge, understand, skills and competences that will be required, where in the organization the requirements exist when they are needed, and in what quantities.
The data must be gathered in an organized and systematic way.
According to Armstrong, there are four basic demand forecasting methods for estimating the number of people required:
(i) Managerial Judgement:
Managerial judgement is a subjective technique. However, it is most commonly used and is most effective in small organizations and where structure, technology and productivity remain relatively stable. In this technique, managers estimate their future workloads and decide how many people they will need.
The managers’ decisions are based upon what they know about past trends and forthcoming changes. The information required for such judgement may include replacements for requirements, leavers, transfers and promotions, possible improvements in productivity, redeployment of existing staff, planned changes in output levels, planned reorganization of work, and the impact of changes in employment law or collective agreements.
This is top-down approach. In bottom up approach the line managers submit staffing proposal for agreement by senior managers. Armstrong suggests the use of both approaches in which, in addition to being given guidelines, line managers are encouraged to seek the help of the HR organization and methods or work study department.
Staffing targets are usually set and while the line managers are producing their departmental and functional forecasts. HR work study and O&M get together to produce an organization-wide HR forecast. The use of this technique drawn on the contents of the business plan in which guidelines are issued to the managers indicating which of the organization’s future activities will be most likely to affect their department.
Both forecasts (the line managers’ and the HR version) are then reviewed by an HRP committee consisting of functional heads. This committee reconciles with department managers any discrepancies between the two forecasts.
(ii) Ratio-Trend Analysis:
If the relationship between the productivity volume and the number of employees remains stable in the future, this technique proves effective. It would, however, be risky to assume that this relationship will remain constant. Few organizations would survive without at least some element of growth and enrichment, and the technique, therefore, emphasizes the need to allow for foreseeable changes.
This implies that the efficiency with which the technique is managed relies upon the planner’s ability to handle changing ratios, a task that is made somewhat easier when the changes are planned, or at least foreseen. If the organization plans to introduce new technology into the administrative and manufacturing processes, then demand forecasts would have to be based, inter alia, upon the need for new knowledge and skills.
Additionally, however, the new technology may reduce the human resource demand, which would affect the balance of the relationship between the number of workers and the predicted productivity figures. In such a case, forecasting the demand for skill and competence requirements would probably be more appropriate through the use of managerial judgement.
(iii) Work Study Techniques:
Work study techniques are used now less frequently than they were used earlier, largely due to the decline in manufacturing. They are used to measure work in terms of how long it takes for operations to carry out particular tasks and how many operators would be required to carry out a total work schedule.
The work study approach is must effective when it is used to forecast requirements on the factory floor and in the administrative sections where the tasks are repetitive.
(iv) Modeling:
Modeling refers to mathematical modeling techniques in which spreadsheets are used in the preparation of demand and supply forecasts. Models may be divided into Flow models and mathematical models.
Flow Models:
Among the flow models, the Markov model is the simplest one to forecast the human resource demand.
This model involves the following:
(a) Determining time period that will be covered under forecast.
(b) Establishment of employee’s categories to avoid overlapping of various categories.
(c) Enumeration of annual flows among various categories for several time periods.
(d) Estimation of probability of flows or movements from one category to another based on past trends in this regard.
However, the Markovian model suffers from heavy reliance on past data which may not be accurate in abnormal situations like periods of turbulent change, and individual accuracy in forecast is sacrificed at the cost of group accuracy.
Mathematical Models:
Mathematical models establish relationship between independent variables and dependent variables.
2. Forecasting HR Supply:
Forecasting HR supply requires information from the internal and external labour markets. Forecasting of human resources begins with the current human resource inventory, also called human resource audit. Human resource inventory contains information about present human resources in the organization.
It reveals what is available in the stock of manpower and what can be expected in future. HR planners monitor the staff turnover and workforce stability indices. The staff turnover index provides information about the likely turnover. The stability index indicates the degree to which long-serving employees remain with the organization.
(i) Forecasting Internal Supply:
Most of the employees needed in the future are already in the workforce and many of them will stay in their current positions. Staff movement however, has to be taken into account. Quantitative and qualitative information about the current workforce in terms of the kind of work that is carried out by each individual; the qualifications, experience, skills and competence they need in order to do the job and the level at which they operated needs to be gathered.
The current workforce is assessed as a source of supply within the context of continuous movement and activity. It may be that a large proportion of the employees will remain in their present positions, but they are always people leaving and joining the organization, being promoted, transferring, and so forth.
From the HR records the information may be obtained to assess- how many employees there are, the nature of their skills and other qualities, the level of status in the organization, the standards of their performance, their attitudes and versatility, their potential for promotion or other movement, how many are likely to go sick, and when, how many are likely to resign or be dismissed, how many will retire, and when?
(ii) Calculating Staff Turnover:
Staff turnover refers to the rate at which people leave the organization. The turnover index is expressed as a ratio of number of leavers in a year to the average number of employees multiplied by 100 to express in per cent terms
This simple calculation is fine for comparison of the staff turnover with that of other organizations in the same industry, or against national trends. But this information will be of limited use to the HR planner in a medium-sized or large sized organization. In such organizations, the planner needs to identify the sectional distribution of staff turnover for every separate department and function in the organization.
Calculating the sectional distribution of staff turnover is vital if your projection of future HR needs is to be useful. The departmental or functional calculation will enable to know where the replacement staff will be needed and the kinds of skills and other qualities contained in the requirement.
Calculating the Workforce Stability Index:
The workforce stability index is expressed as a percentage and is calculated as-
The forthcoming year
Experience indicates that people who are going to do so in their first year of employment are those who stay for a year will probably stay for much longer. The WSI, therefore, is useful in that it provides an indication of the percentage of people who will be unlikely to leave in the forthcoming year.
This stability index, however, does not take in to account the number of people joining the organization during the past year now does it account for exact length of service although there are techniques that can be used to obtain such information.
(iii) Analysis of External Labour Turnover:
Hill and Trist (1955) identified three phases in labour turnover, the induction crisis, differential transit and selected correction. The induction crisis refers to the people who are likely to leave do so in the first 12 months of employment. According to Julie Beardwell and her colleagues,’ the major drawback with all quantitative methods of turnover analysis is that they provide no information on the reasons why people are leaving.
Quantitative analyses can help to highlight problems, but they give no indication about how these problems might be addressed.
(iv) In addition to quantitative methods of calculating turnover and stability, qualitative methods may also be used for gathering data from exit interview. They are most frequently carried out when leaving employee joins another employer. The exit interview may help to gather information about the reasons for leaving.
For example, the pay and other entitlements may be more attractive elsewhere, or the prospects of training and promotions are better.
The organization may find the interviewee’s responses valuable in the sense that it may consider using them to make improvements. However, the responses to an exit interview may not be totally relied upon as the person leaving will be aware that his next employer might request a reference and the interviewee’s responses might be couched in terms designed to ensure that nothing is said that might diminish the value of the reference.
Also, an employee cannot be submitted to an exit interview, but most leavers will agree, if only on the grounds that a refusal might negatively influence the reference.
3. Matching HR Demand and Supply:
Once demand for and supply of human resources of an organization is forecast, the two need to be reconciled. The reconciliation will reveal either shortage or surplus of human resources in future. Accordingly, action plan will be prepared to strike a balance between the demand and supply of human resource. In case of shortage of human resources this will be met through recruitment, transfer, promotion, training and development, retention etc.
In case of surplus human resources, it can made through redeployment, retrenchment, voluntary retirement scheme. However, downsizing should be done in consultation with the employees union to avoid employees’ resistance for change in job.
4. Monitoring and Control:
The final stage is monitoring and control. Once the action plans are implemented, these need to be reviewed, regulated and monitored against the set standards. Monitoring of action plans and programs help reveal deficiency if any. Corrective measures help remove deficiency and, thus, control the implementation of action plans in the right direction.
In case of changes in business environment, the action plans formulated earlier need to be modified in the light of changing needs of organization in the changed environment.
Human Resource Planning Process:
Process # 1. Analysis of Organization’s Objectives and Plans:
Firstly, the HR manager should consider the organization’s overall objectives and policies as the HRM objectives are derived from them. HR plans should be aligned with the organization’s plans for the success of the organization.
Consideration of the factors such as time period, organization’s strategic decisions (e.g. growth through M&As or internal growth), flexibility, formality, etc. should be taken into account while formulating HR plans. The ultimate mission or purpose is to relate future human resources to future enterprise need so as to maximize the future return on investment in human resources.
Process # 2. Analysis of HR Requirements:
Manpower requirement can be analyzed with the help of information provided by existing job analysis and job design information and future business objectives.
The analysis can be divided into 2 parts:
(a) Demand Forecasting:
It is the process of estimating organization’s future quantity and quality of people required. Overall business plans and annual budgets act as a base for demand forecasting. Various other environmental factors are also considered while forecasting such as expansion and growth, management philosophy, business forecasts, government policy, competition, etc.
The various forecasting techniques are:
(i) Managerial Judgement:
This is one of the simplest forecasting techniques. In this, the managers judge about the future demand of the personnel. Managers who are experienced, well-acquainted with the requirements of jobs like workload, ability of employees, future capability, etc. discuss together and reach the figure of demand of labour. After the estimation, the lower level managers submit their requirement to the higher level managers for consideration and revision if necessary.
(ii) Delphi Technique:
In this, estimates of personnel needs are obtained with the help of group of experts. The HR manager obtains the responses from experts and re-considers them and reports back to the experts. Again, the feedback is obtained from the experts through survey method. This technique is considered as qualitative demand forecasting technique.
(iii) Work Study Techniques:
These techniques are more suitable where there is a possibility of work measurement. This is also called as workload analysis. In this, the volume of workload for the forthcoming years are analyzed and on this basis, analysis of personnel requirement is done. Allowances are also made for absenteeism, idle time, labour turnover, etc.
(iv) Ratio-Trend Analysis:
In this technique, the past ratios are studied and future ratios are forecast after making some allowances for changes. Availability of past records and estimate of future changes is essential for using this technique.
(b) Supply Forecasting:
Demand forecasting provides the HR manager the estimation of number and type of personnel required. Supply forecast provides information regarding the ability of organization to procure the required number of personnel. It is concerned with the availability of personnel from within and outside an organization.
The supply forecast includes:
(i) HR Audits:
This analyses the present employees’ skills and abilities. The audits of managers are known as management inventories whereas those of non-managers are called as skill inventories. This gives the HR planners a detailed summary of the capabilities available in the organization.
(ii) Analysis of Internal Supply:
The internal supply of labour is affected by the following factors absenteeism, employee turnover, promotions and productivity. Absenteeism refers to unauthorized absence from the work. In other words, it is the failure of a person to come to work when he is scheduled to work. Turnover is the rate of displacement of the personnel employed due to resignation, retirement, etc.
Turnover refers to the movement into and out of an organization by the workforce. It affects the stability of workforce. The productivity levels of the employees also influence HR requirements. Rise in productivity of personnel will reduce the requirement and vice-versa. Promotions and transfer of employees from one position to another too will impact the internal availability.
(iii) Analysis of External Supply:
Along with the internal supply analysis, there is a need to look for the prospective employees from the external sources. It is important to have new blood and new experience in the organization. There are numerous sources of external supply such as universities, technical and management institutes, etc.
Process # 3. Development and Implementation of HR Plans:
After the demand and supply forecast of the personnel, the next logical step is to obtain and maintain a balance between these two. This will ensure that organization fills up its vacancies with the right number and right kind of employees at the right time. This is done by developing HR programmes and implementing them.
Implementation refers to converting HR plans into action. As a part of HR plan implementation, there may be series of actions to be taken. Depending upon the situation, programmes like recruitment, selection, training and development, retention, etc. are planned. Planning depends upon the situation.
For example, if there is a situation of surplus labour in the organization, then management would not go for fresh hiring but offer schemes like VRS to its employees and plan gradually about retrenchment. On the other hand, if there is a situation of shortage of employees then the organization can proceed for fresh recruitment, hire full-time and contractual employees, ask for overtime, etc.
Process # 4. Control and Review:
This is the final phase of HRP process. HRP needs considerable amount of financial resources along with staff and time. Thus, an HR plan should have set targets to be achieved. Regular monitoring will reveal the deficiencies in HR plan so that corrective action should be taken well in time.
The Process of Human Resource Planning:
The general definition of human resource planning suggests several interrelated activities that together constitute an HRP system. An effective HRP closes the gap from the current situation to a desired state of affairs in the context of an organizational strategy.
Thus, an HRP system may include:
i. A talent inventory to assess current human resources and to analyse how they are currently being used,
ii. A human resource forecast to predict future HR requirements like the number of workforce needed, number expected to be available, skills required, labour supply, etc.,
iii. Action plans to enlarge the pool of people qualified to fill the projected vacancies through such actions as recruitment, selection, training, placement, promotion, development, etc., and
iv. Review and monitoring to provide feedback on the overall effectiveness of the human resource planning by monitoring the degree of attainment of HR objectives.
An effective HRP closes the gap between the current situation and a desired situation in the context of an organization’s strategy.
The steps involved in HRP may be summarized as follows:
1. Linking organizational strategy to employment planning,
2. Forecasting,
3. Gap analysis, and
4. Implementation of HR and action plans.
Linking Organizational Strategy to Employment Planning:
Environmental scanning helps HR planners identify and anticipate sources of problems, threats, and opportunities that should drive the organization’s strategic planning. Scanning provides a better understanding of the context in which HR decisions are/will be made. Both an external and internal environment scan are critical for effective planning.
Amazon(dot)com’s downsizing in 2001 is an example of the use of environmental scanning to drive strategy and HR planning in a situation of uncertainty. Their sales and growth projections drove their downsizing efforts although there was great uncertainty about the state of the American economy.
While there can be (and often are) situations with ambiguous problems, threats, and opportunities, the probability of reducing or eliminating the ambiguity is increased by a more thorough environmental scan. The idea here is at least to attempt to turn a threat into an opportunity with information.
In general, the greater the amount of relevant information that managers have about a problem, the more likely that the problem can be turned into an opportunity.
Both external and internal environmental scans are critical for this information. Amazon is a good example here. They closed a large and costly customer service centre in Seattle despite projections of 20 to 30% sales growth because their study of global telecommuting told them they could meet their sales growth projections with a far less costly customer service centre in India.
The biggest benefit of strategic planning is its emphasis on growth for it encourages managers to look for new opportunities rather than simply downsizing. But the main problem in strategic planning is planning in times of uncertainty. Since the future is unpredictable, the burden of strategic planning need not rest only, with the top management but be shared by the line managers, customers, and suppliers.
Hewlett Packard CEO Lewisplatt typifies this approach- ‘My role is to encourage discussion of the wide spaces, the overlap and gaps among business strategies, and the important areas that are not addressed by the strategies of individual HR businesses.’ To bridge these gaps, HP brings all its customers and suppliers together with managers in its many business units in strategy sessions aimed at creating new market opportunities.
Human resource planning parallels the plans for the business as a whole. HRP focuses on issues such as what the proposed business strategies imply with respect to human resources, and the internal and external constraints an organization faces, for example, the work rules stipulating the working conditions and age specifications.
The questions that need to be addressed are:
a. What are the implications in staffing, compensation practices, training and development, etc.?
b. What can be done in the short term to prepare for long-term needs?
A variety of HR planning applications arise from the linkage to business strategy. While both the strategic planning and the long-range perspective might highlight the organization’s philosophy, environmental scanning helps in determining the objectives, goals, strengths, and constraints of the organization.
The HR planning process might directly focus on:
a. Vision of the business.
b. External factors.
c. Internal supply analysis.
At the level of operational planning, the focus is on action plans, availability of resources, plans for acquisition, mergers, diversifications, etc. The direct linkage to HR planning arises in terms of forecasting requirements such as creating a database of human resources and planning for the projected requirements.
The recruitment process, promotions and transfers, training and developmental programs, etc. are framed basing on the availability of budget, program scheduling, and performance goals.
One critical component at this stage is to understand the relevant labour market. Labour market conditions definitely influence HR planning in terms of both number and types of available employees. There is increased demand or shortage of supply for certain types of skilled workforce.
For example, there is a great demand for doctors, nurses, teachers, scientists, and other skilled personnel. Certain laboratories lack competent people who will be able to execute their tasks. The student-teacher ratio is pathetic.
On the other hand, scarce availability of workforce with certain categories of skills forces the organizations to engage not so competent workforce. To a certain extent, availability or non-availability of the workforce is affected by geographical factors. And to a certain extent, technology is facilitated to bridge the gap caused by geographical factors. For example, global telecommuting is having a significant impact on the definition of labour market.
Another factor is the role of competing employers. The number and type of employers seeking similarly qualified personnel ok offering similar compensation in the same geographical location also can serve to define the labour market.
The world is now the labour market for many skilled and unskilled jobs. The outsourcing of the manufacturing or assembly process to a foreign location is now commonplace in many industries. According to the National Association of Software Service Companies in India, the $1 billion customer service business in 2001 is expected to increase to 200,000 employees and $5 billion by 2008.
One call centre in Bangalore, 24x7customer(dot)com, founded in 2000, includes a Fortune 500 financial services company and a major telecommunications company. General Electric and British Airways have large phone banks in India and are expanding this function due to low cost and low turnover of personnel and high quality of the work.
As of 2001, entry-level customer service representatives in India earn between $2000 and $3000 per year, a good salary by India’s standards, which probably explains the low turnover. The total savings estimates for U.S. companies for this critical work is between 20 and 40%.
What is also becoming more common is that skilled labour is being farmed out to lower paid, overseas workers as well. Hewlett-Packard, IBM, Texas Instruments, and Siemens in Bangalore, India, employ skilled workers, many of whom write software packages for these companies. Dallas-based software company 12 Technologies runs software centres in Bangalore and Bombay.
The programming costs are estimated to be about one-third of the cost of an American programmer. However, this difference could change rapidly as the demand for Indian programmers grows. The consulting firm McKinsey and Company reports that by 2008, new jobs in accounting software development, and transcribing will generate 8,00,000 new jobs and $17 billion in revenue for India.
According to Joel Kotkin, the author of Tribes, Indians will emerge as a leading economic force following China. It is estimated that around 20 million of the Indians who live in other countries constitute the best-educated and most affluent group in the world. Even though Asia has seen its cultural influence for millennia, only in the last few years the diaspora reached significant levels.
Mr P.V. Nair, the Indian High Commissioner to Singapore states, ‘Liberalisation in India has not only made Indians abroad willing to invest in India, it has also liberated the India-based entrepreneur from past inertia.’
In 1989, according to some estimates, the combined overall global real- estate investment of Indians totalled over US$ 100 billion. In Britain, the 10th wealthiest family are the Hindujas.
Process of Human Resource Planning (Top 9 Steps):
Process of Human Resource Planning consists of the following steps:
(1) Analysing organisational plans.
(2) Demand Forecasting-Forecasting the overall human resource requirements in accordance with the organisational plans.
(3) Supply Forecasting-Obtaining the data and information about the present inventory of human resources and forecast the future changes in the human resource inventory.
(4) Estimating the net human resource requirements.
(5) In case of future surplus, plan for redeployment, retrenchment and lay-off.
(6) In case of future deficit, forecast the future supply of human resources from all sources with reference to plans of other companies.
(7) Plan for recruitment, development and internal mobility if future supply is more than or equal to net human resource requirements.
(8) Plan to modify or adjust the organisational plan if future supply will be inadequate with reference to future net requirements.
The eight steps of human resource planning are depicted. But the same order need not be followed in the actual planning process as the steps are interdependent and sometimes, the first step and the last step may be processed simultaneously and the planner sometimes may not explicitly process some steps. However, it is helpful to the planner to plan for human resources effectively without any complications if he/she has an idea about all steps of HRP.
These steps are discussed in detail as given below:
Step # 1. Analysing the Organisational Plans:
The process of human resource planning should start with analysing the organisational plan into production plan, technological plan, plans for expansion, diversification, etc., marketing plan, sales plan, financial plan. Each plan can be further analysed into sub-units.
Detailed programmes should be formulated on the basis of unit-wise plans. Practicability of each programme should be ensured. Analysis of organisational plans and programmes helps in forecasting the demand for human resources as it provides the quantum of future work activity.
Step # 2. Forecasting the Overall Human Resource Requirements:
The existing job design and analysis may thoroughly be reviewed keeping in view the future Demand capabilities, knowledge and skills of present employees. Further, the jobs should be redesigned and re-analysed keeping in view the organisational and unit-wise plans and programmes, future work quantum, future activity or task analysis, future skills, values, knowledge and capabilities of present employees and prospective employees.
The jobs generally should be designed and analysed reflecting the future human resources and based on future organisational plans. Job analysis and forecasts about the future components of human resources facilitate demand forecasting. One of the important aspects of demand forecasting is the forecasting of the quality of human resources (skill, knowledge values, capabilities, etc.) in addition to quantity of human resources.
Important forecasting methods are:
(a) Managerial judgment;
(b) Statistical techniques; and
(c) Work study techniques.
(a) Managerial Judgment:
Most of the small scale and unorganised industries cannot have systematic data-banks for manpower information and job analysis. Such organisations resort to the management-judgment approach. Under this method, the managers or supervisors who are well acquainted with the workload, efficiency and ability of employees, think about their future workload, future capabilities of employees and decide on the number and type of human resourced to be required.
This is done by the supervisors concerned who send the proposals to the top officials for approval. Under this bottom-up approach, the management at the top compares the proposals with the organisational plans, makes necessary arrangements and finalises the plans. Alternatively, this exercise can also be done by the top management which in turn sends the information, at the top prepares the organisational plans, departmental plans and human resource plans.
But the best approach is participative approach, where both the management at the top and supervisors at the bottom meet and decide on the human resource needs based on the experiences of the supervisors and the plans formulated by the top officials.
(b) Statistical Techniques:
There are two types of statistical techniques useful for human resource planning, viz.:
(i) Ratio trend analysis, and
(ii) Econometric models.
(i) Ratio Trend Analysis:
Under this method, the ratios are calculated, for the past data relating to number of employees of each category and production level, sales level, activity level/ work load level and direct employees and indirect employees. Future production level, sales level, activity level/work load are estimated with an allowance for changes in organisation, methods and jobs. Future ratios are also estimated when there are changes to come in organisation and human resources. Then future human resource is calculated on the basis of established ratios. The following example gives clear idea.
Due to decline in physical stamina of employees, change in values and increase in social activities it is estimated that the future ratio would be 1:420. Then foremen required as on 1-1-2013 = 6.
(ii) Econometric Models:
Econometric models for human resource planning are built up by analysing the past statistical data and by bringing the relationship among variables. These variables include those factors which affect manpower requirement directly and indirectly like investment, production, sales, activities/work load, etc. The econometric model or formula is used to forecast manpower needs based on movements in various variables.
(c) Work Study Techniques:
These techniques are more suitable where the volume of work is easily measurable. Under this method, total production and activities in terms of clear units are estimated in a year. Man hours required to produce/perform each unit is calculated. Work ability of each employee is estimated in terms of man hours after giving due weightage to absenteeism, rest, etc. Then the required number of employees is calculated. The following example gives clear idea for Clerical Section of Human Resource Department of XYZ Co. Ltd.
Another classification of methods of Human Resource Demand estimation is:
(i) Estimates based on opinions of departmental heads. This method is similar to managerial judgment.
(ii) Imitation of existing practices in other organisations in the country and/or abroad. This method may be used as a supplementary device for checking the authenticity of other methods adopted.
(iii) Organisation-cum-succession charts and superannuation data.
(iv) Work Study Method- It includes ascertainment of output target, operationalise output targets, and find basic labour requirements for each operation or segment of production schedule. This is similar to economic models.
(v) Estimation based on technology, equipment, layout and design considerations.
(vi) Estimations based on various laws. Some laws affect the quantity of HR, whereas other laws affect the composition of HRs.
(vii) Historical record of production.
(viii) Job analysis.
(ix) Statistical Methods – The two important types are Projection of basic manpower ratios and regression and correlation analysis. After estimating the overall human resource requirements the present human resource inventory is obtained.
Step # 3. Supply Forecasting:
The first step of forecasting the future supply of human resource is to obtain the data and information about the present human resource inventory.
Existing Inventory:
The data relating to present human resources inventory in terms of human resources components, number, designation-wise and department-wise should be obtained.
Principal dimensions of human resources inventory are:
(i) Head counts regarding total, department-wise, sex-wise, designation-wise, skill-wise, pay roll-wise, etc.
(ii) Job Family Inventory – It includes number and category of employees of each job family, i.e., all jobs related to same category like clerks, cashiers, typists, stenos, etc., each sub- job family, i.e., all jobs having common job characteristics (skill, qualification, similar operations) like production engineer (mechanical) and maintenance engineer (mechanical) and broad job families like general administration, production, etc.
(iii) Age Inventory – It includes age-wise number and category of employees. It indicates age- wise imbalance in present inventory which can be correlated in future selections and promotions.
(iv) Inventory of skill, experience, values, and capabilities.
(v) Inventory of qualifications and training including minute qualifications and training received.
(vi) Inventory of salary grades — pay-wise, allowances-wise and total salary-wise.
(vii) Sex-wise inventory.
(viii)Local and Non-local-wise inventory.
(ix) Inventory of past performance and future potentialities.
Age Composition of Human Resources:
Generally, the individuals are dynamic, creative and innovative during their young age. However, they may lack judgment and maturity during that age. Hence, a mix of employees young and old is preferred by the organisations. The HRP should give due consideration to and keep age-wise human resource mixing at the optimum level by renewing the manpower as shown in Manpower Renewal Forecast Model.
Potential Losses:
The second step of supply forecasting is estimation of future losses of human resources of each department and of entire organisation. Potential losses to the organisation include voluntary quits, deaths, retirements, dismissals, lay-offs, disablement due to ill health or involvement in accident, loss of values, aptitude, etc., due to change in the attitude of existing employees towards the job, department and organisation calculation of inventory at a future date .
Potential losses to a particular department or sub-unit include factors like promotions out, transfers out and demotions out in addition to the above factors relating to the organisation. The reasons for potential loss can be classified as- (a) Permanent total loss; (b) Permanent partial loss; (c) Temporary total loss; and (d) Temporary partial loss.
Potential Additions:
Similar to potential loss, there will also be additions to the present inventory to human resource. Potential additions are new hires, promotions’ in, transfer in, and demotion in- (a) Permanent total; (b) Permanent partial; (c) Temporary total; and (d) Temporary partial.
Analysing Sources of Supply:
After estimating future supply of human resources, sources of supply should be analysed with a view to ensure the availability. Both internal and external factors affecting manpower supply should be analysed. Internal factors include- training facilities, salary levels, benefits, inter-personal relations, company programmes, scope for self-advancement and growth, promotional opportunities, pride for creative and innovative ideas, providing challenging work, etc.
Step # 4. Estimating the Net Human Resource Requirements:
Net human resource requirements in terms of number and components are to be determined in relation to the overall human resource requirements (demand forecast) for a future date and supply forecast for that date. The difference between overall human requirements and future supply of human resource is to be found out.
Step # 5. Action Plan for Redeployment, Redundancy/Retrenchment:
If future surplus is estimated, the organisation has to plan for redeployment, redundancy etc. If surplus is estimated in some jobs/departments, employees can be redeployed in other jobs/ departments where the deficit of employees is estimated. Organisation should also plan for training or reorientation before redeployment of employees.
Redeployment takes place in the form of transfers. If the deficit is not estimated in any job/department and surplus is estimated for the entire organisation, the organisation, in consultation with the trade unions, has to plan for redundancy or retrenchment.
Redeployment Programmes:
The redeployment programmes are as follows:
i. Outplacement:
Outplacement programmes also intended to provide career guidance for displaced employees. This programme covers retaining the prospective displaced employees who can be redeployed elsewhere in the organisation, helping in resume writing, interview techniques, job search etc.
ii. Employment in Sister Organisations:
The surplus employees are offered employment in sister organisations either at a similar level or at a lower level under the same management. This programme is undertaken when the jobs are vacant in the sister organisations.
iii. Employment in Other Companies:
Under this programme, the HR manager contacts other similar companies for possible hiring of the surplus employees. The HR manager helps the surplus employees in getting employment, if the vacancies are available in other companies.
Redundancy Plan Includes:
Type and number of employees, time of and place of retrenchment, type of help to be extended to retrenched employees in the form of compensation, help in getting new job, priority in filling future vacancies.
Redundancy/Retrenchment Programmes:
The redundancy /retrenchment programmes are as follows:
i. Outplacement:
Outplacement programmes are also intended to provide career guidance for displaced employees. This programme covers retraining the prospective displaced employees who can be redeployed elsewhere in the organisation, helping in resume writing, interview techniques, job searching, etc.
ii. Layoffs:
Layoffs can be temporary or permanent. Temporary layoffs are due to the slackness in business, machinery breakage, power failure, etc. Workers are called back as soon as work resumes to the normal position. Permanent layoff is due to liquidation of the company. Proper human resource planning leaving the workforce at proper level can help to reduce this effect.
iii. Leave of Absence without Pay:
This technique helps the company to cut the labour cost and the employee to pursue his self-interest. This technique also helps the company to plan for eliminating the unnecessary job in a phased manner. This concept serves as a productive method to help employees prepare for future changes.
iv. Work Sharing:
Some organisations offer employees the opportunity to share jobs or two employees working one-half time each. This technique solves the problem of retrenchment in the short-run.
v. Reduced Work Hours:
Under this technique, each worker works less hours, and receives less pay, so that two jobs are saved.
vi. Voluntary Retirement/Early Retirement:
Another issue is early retirement. Government of India introduced Voluntary Retirement Scheme under the caption ‘Golden Handshake in order to solve the problem of overstaffing in the public sector. This technique solves the problem of excessive supply of future inventory over the demand for human resources.
vii. Compulsory Retirement:
Under this programme, the HR manager, with the help of live manager, identifies surplus employees and discharges them from the service. Managements do not provide any cash or non-cash benefits to the employees other than normal retirement benefits at the time of discharging or firing.
viii. Creation of Ad Hoc Projects:
Some companies create ad hoc projects in order to provide employment to the surplus staff for the short span of time.
ix. Attrition:
Attrition is the process whereby as incumbents leave their jobs for various reasons, those jobs will be kept vacant or unfilled. Attrition or hiring freezes or ban on employment can be implemented organization-wise or department-wise or job-wise. Indian Railways, other public sector organisations and universities have been following this technique to reduce the problem of over staffing.
Step # 6. Forecast Future Supply from All the Sources:
If deficit is estimated in any department and in the entire organisation, management has to forecast the future supply of human resources from various sources like internal sources, comparable organisations, educational and training institutes, employment exchanges, labour market, etc.
Step # 7. Action Plan for Outsourcing, Recruitment, Development, etc.:
If the forecast relating to future supply of manpower from internal sources of the organisation shows favourable trends, the management may prefer internal candidates and plan for promotion, transfer, training and development. If suitable candidates are not available from internal sources and, if the forecasts relating to future supply from external sources indicate the availability of required human resources, plan for recruitment and selection.
I. Outsourcing Plan:
Many professional organisations have been performing the outsourcing function. These organisations employ human resources of different categories and supply them or lease them to various companies. These companies can avail the services as and when they need and pay the commission to the outsourcing organisation. This system is more or less like getting a machine for use on a lease basis. Outsourcing is more prominent in the information technology industry.
The advantages of outsourcing include:
i. The companies need not plan for human resources.
ii. The companies can/get human resources immediately.
iii. The companies need not manage these resources as such they are free from industrial relations problems.
iv. The companies can dispense with this category of employees immediately after the work is over.
II. Recruitment and Selection Plan:
Recruitment and selection plan covers the number and type of employees required, when they are required for the job, time necessary for recruitment and selection process, recruitment sources, recruitment techniques to be used, selection procedure to be adopted and selection techniques to be used to subsequently recruiting the required candidates. It also covers the time factor for induction, preliminary training and placement.
III. Promotion Plan:
The promotion plan includes establishing of the ratio of internal promotion to external recruits, basis for promotion, promotional channel, reservations in promotions etc. The transfer plan includes channel, company rules regarding organisation initiated transfers and employee initiated transfers.
IV. Training and Development Plan:
The training and development plan covers areas to be developed, training techniques, training progranuhes, training time; availability of trainers, in plant training or institute training, new courses to be developed or changes in the existing courses, cost benefit analysis of training, development of the employees and matching of their improved skills with future job requirements, etc.
V. Productivity Plan:
The productivity plan includes maximisation of productivity or minimisation of labour cost per unit of output through technological changes, improving/streamlining methods, procedures and systems, productivity bargaining, training, financial incentives, developing various schemes, motivation, commitment, organisation development programmes, job enrichment/enlargement, participation, etc. It also includes improving of productivity efficiency.
Step # 8. Modify the Organisational Plan:
If future supply of human resources from all the external sources is estimated to be inadequate or less than the requirements (share of the particular firm in labour market), the manpower planner has to suggest the management to alter or modify the organisational plan.
For example, if the organisational plan of Indian Railways indicates that computerisation should be completed in all the stations and offices by 1991 and the estimations of future supply of human resources shows that the supply of computer professionals would be less than the human resource requirements from all the sources even by 1991, the railways have to modify their organisational plan by extending the period of computerisation by some more time when the supply of human resources available to railways will be equal or greater than the requirements of human resources.
In view of shortage of certain categories of employees, the organisation has to take care not only of recruitment but also retention of existing employees.
Step # 9. Retention Plan:
Though there is the problem of unemployment, organisations experience shortage of some categories of employees and some organisations experience shortage of some other categories of employees due to employee mobility. Hence, the organisations have to plan for retention of the existing employees.
Retention plan includes:
(i) Adjustment of the salary levels with those of the comparable industries so as to remove inequalities.
(ii) Providing opportunities for career development provide training facilities, adopting the policy of promoting from within, more systematic promotional procedure, providing opportunities for self-development, assignment of challenging work, etc.
(iii) Introduction of effective consultation and negotiating machinery, encouragement of grievance redressing and conflict resolution rather than suppressing.
(iv) Providing of extensive training and development facilities. Encouraging the employees to participate in the management, development programmes and training programmes both within and outside the organisation and programmes should be effective in meeting not only organisational but individual needs.
(v) Selection procedure should meet the job and organisational requirements not only for the present position to which the candidate has applied but also his potentialities for future jobs in the career line.
(vi) Provide more conducive working conditions and extensive fringe benefits.
(vii) Provide the scope for extensive participation of the employee in decision-making and create the environment that the system in the organisation is participative management but not autocratic management.
(viii)Provide the facilities and environment for conducive interpersonal relations.
(ix) Provide the scope for challenging, creative and innovative work.
Control and Review Mechanism:
After the action plan is implemented regarding redeployment (like promotion, transfer, demotion), redundancy and retrenchment, recruitment, selection, training, development and retention, human resources structure and system should be controlled and reviewed with a view to keep them in accordance with the plan. N.K. Singh identified the steps followed by the Indian industries regarding control and review of human resource structure and system.
They are:
i. Considering the decisions regarding additions at the highest level.
ii. Sending periodic reports to the top management stating the existing manpower system and changes therein due to internal mobility and external mobility.
iii. Using the personnel budgets as a basis for control as they are formulated on the basis of manpower plans.
iv. Auditing the human resources and studying manpower utilisation. Manpower utilisation can be measured by relating net man-hours actually utilised in work to the standard man- hours planned to be utilised in work.
v. Measuring the efficiency of labour periodically in the form of labour productivity, employee-sales ratio, employee-investment ratio; employee-turnover ratio, employee- profit ratio, etc. and compare them with standards of the organisation and actual of other comparable organisation.
vi. Conducting the surveys and research studies with a view to find out the level of job satisfaction, morale, and employee attitudes, interpersonal relations, etc. and review and correct the situation with the help of the findings of the surveys and studies.
vii. Conducting studies with a view to find out the efficiency and validity of recruitment, selection, training, etc.
viii. Sending the reports regarding absenteeism, irregularities, overtime etc.
ix. The break-even point/payback period for new employees.
x. Conducting exit interviews; spotting out the area responsible, finding out the causes and correcting the situation.
Process of Human Resource Planning (Multi-Step Process):
The process of human resource planning is one of the most crucial, complex and continuing managerial functions which, according to the Tata Electrical Locomotive Company, “embraces organisation development, management development, career planning and succession planning.”
The process has gained importance in India with the increase in the size of business enterprises, complex production technology, and the adoption of professional management technique.
It may be rightly regarded as a multi-step process, including various issues, such as:
(A) Deciding goals or objectives;
(B) Estimating future organisational structure and manpower requirements,
(C) Auditing human resources;
(D) Planning job requirements and job descriptions; and
(E) Developing a human resource plan.
(A) Deciding Goals or Objectives:
Human resource planning fulfills individual, organisational and national goals; but, according to Sikula, “the ultimate mission or purpose is to relate future human resources to future enterprise needs so as to maximise the future return on investment in human resources.” In effect, the main purpose is one of matching or fitting employee abilities to enterprise requirements, with an emphasis on future instead of present arrangements.
The objectives may be laid down for a short-term (i.e., for one year). For example, the short-term objective may be to hire 25 persons from Scheduled Tribes or Backward Class for purposes of training. The long-term objective may be to start a new industry, to expand the market, to produce a new product, to develop its own sales force rather than depend on distributors, or to have minority group members eventually in position of middle and upper management cadres.
(B) Estimating the Future Organisational Structure or Forecasting the Manpower Requirements:
The management must estimate the structure of the organisation at a given point in time. For this estimate, the number and type of employees needed have to be determined. Many environmental factors affect this determination. They include business forecasts, expansion and growth, design and structural changes, management philosophy, government policy, product and human skills mix, and competition.
Forecasting provides the basic premises on which the manpower planning is built.
Forecasting is necessary for various reasons, such as:
(a) The eventualities and contingencies of general economic business cycles (such as inflation, wages, prices, costs and raw material supplies) have an influence on the short-range and long-run plans of all organisations,
(b) An expansion following enlargement and growth in business involves the use of additional machinery and personnel, and a re-allocation of facilities, all of which call for advance planning of human resources,
(c) Changes in management philosophies and leadership styles.
(d) The use of mechanical technology (such as the introduction of automatic controls,
or the mechanisation of materials handling functions) necessitate changes in the skills of workers, as well as a change in the number of employees needed,
(e) Very often, changes in the quantity or quality of products or services require a change in the organisation structure. Plans have to be made for this purpose as well.
After estimating what the future organisation structure should be, the next step is to draw up the requirements of human resources, both for the existing departments and for new vacancies.
For this purpose, a forecast of labour force is needed, and requisitions should be obtained from different departments, i.e., forecast has to be made in returns of functional category; the members needed; and the levels at which they are required.
Vacancies, occurring in any department, should be notified in writing by different department heads to the personnel department, stating clearly the number of vacancies to be filled, job or category-wise types of personnel needed, their technical qualifications and experience, and the reasons for acquisition (i.e., whether for replacement or addition); a statement of duties, types of jobs, pay scales, age, and previous experience should also be made. Requisitions should be based on accurate job specifications by first line supervisors. They should, as far as possible, be clear-cut about the exact demands of a job.
In determining the requirements of human resources, the expected losses which are likely to occur through labour turnover quits, retirement, death, transfers, promotions, demotions, dismissals, disability, resignations, lay-offs, and other separations should be taken into account. Changes in the human quality resulting from the experience gained in the jobs during the period and the training achieved also need to be considered.
The addition of new lines of production and new projects also influence the demand estimates of human resources. The basic fact to remember is that the human resource in an organisation constantly changes in terms of its present and future size.
Additional human resources are gained through new employment of personnel, promotions, through transfers and demotions; but personnel is lost through voluntary quits, death, dismissals, terminations and retirements.
After making adjustments for wastage, anticipated and expected losses and separations, the real shortage or surplus may be found out. If a shortage is there, efforts are made to meet it either by new recruitment or promotion from within, or by developing the existing staff. If there is a surplus, it is to be decided how it will be dealt with, i.e., whether there should be transfers, lay-offs, retrenchment or reduction in the hours of work of sill.
Underestimation of the quality and number of the employees required would lead to shortfalls in performance, while overestimation would result in avoidable costs to the organisation. According to Dr. Ram Tarneja, “management can ensure control of labour costs by avoiding both shortages and surpluses of manpower through proper manpower planning.”
It may be noted that for purposes of manpower planning, the main dimensions to be taken into consideration are:
(i) The total number of personnel available, this could be obtained from the pay-rolls and other personnel records, such as the applications for employment. The total number has to be classified on some basis, such as manual workers (i.e., daily-rated, weekly-rated or monthly-rated); clerical employees, ministerial staff, managers and other executives; specialists and skilled and unskilled workers; sex-wise distribution, etc.
(ii) The job-family; i.e., a detailed job-description for each position such as stenographers who may belong to various departments, e.g., finance, marketing, personnel, public relations, general administration, etc.
(iii) Age distribution of the employees, available in the present departments, say in the age-groups 20-29 years; 30-45 years; 46 years and above.
(iv) Qualification and experience desired, such as a person with 5 years or 10 years’ experience in a particular branch/job; and whether under-graduate, post-graduate, or MBAs or graduates in Science, Commerce, Arts, Engineering or professional diploma holders, etc.; or with specialised knowledge in the field of marketing, finance, computer programming or engineering work.
(v) The salary range, etc.
(C) Auditing Human Resources:
Once the future human resource needs are estimated, the next step is to determine the present supply of manpower resources. This is done through what is called “Skills Inventory.” A skills inventory contains data about each employee’s skills, abilities, work preference and other items of information which indicate his overall value to the company.
The above facts are usually recorded by an employee in some forms from which the information is fed into a computer. Other data pertaining to his performance ratings and his superiors’ evaluation of his potential for promotion may also be fed into the computer.
The result may either be kept in a file (on tape or otherwise stored) containing information as to the number of employees in the organisation, and other data about each employee, and an indication of his fitness for promotion.
Some organisations do not compile a Skills Inventory but prepare Organisation Charts to determine “how many people, at what level, in what position and what kind of experience and training would be required to meet the objectives.” These charts show a person’s age, the number of years he has been in a particular position, and his fitness for promotion.
These Charts or Skills Inventories help in determining and evaluating the quantity and quality of the present human resources of an organisation. They tell us ‘what exists in stock’ and ‘what is needed to be added to that stock’, taking into account the capability, qualifications, experience, skill, knowledge and promotional potential of employees.
Some companies maintain a Manning Table, which lists all the jobs in the unit and the number of workers holding each job. Other Companies also use Manpower Replacement Charts; which show the present performance of each position holder and the promotional potential of possible replacements.
Once the present manpower resources are determined, the personnel department can estimate what changes will occur in the present labour force in the next few years, say, 5 years.
(D) Job Analysis:
After having decided how many persons would be needed, it is necessary to prepare a job analysis, which records details of training, skills, qualification, abilities, experience and responsibilities, etc., which are needed for a job. Job analysis includes the preparation of job descriptions and job specifications.
(E) Developing a Human Resource Plan:
This step refers to the development and implementation of the human resource plan, which consists in finding out the sources of labour supply with a view to making an effective use of these sources.
The first thing, therefore is to decide on the policy should the personnel be hired from within through promotional channels or should it be obtained from an outside source. The best policy which is followed by most organisations is to fill up higher vacancies by promotion and lower level positions by recruitment from the labour market.
The labour market is a geographical area from which employers, recruit their work force and labour seeks employment. Here, the forces of demand and supply interact.
A labour market generally has the following characteristics:
(a) It is highly unstructured and unorganised, for a majority of workers are illiterate and ignorant and do not have any information about available job opportunities.
(b) The procedures by which companies recruit workers and the methods by which workers go about getting jobs are highly variable.
(c) A great range of wage rates for the same occupation exists in the labour market, depending upon the attitude of the management towards wage levels, the employer’s ability to pay and the productivity of labour.
(d) Labour is mostly not mobile either because it has incomplete or inaccurate knowledge of job opportunities and available wages or because of lack of job security.
(e) The supply of labour fluctuates and is influenced by the population in the labour market, the attractiveness of a job (benefits, services, wage rates, the reputation of a company), the extent of unemployment, and the particular skills that are in demand.
(f) Manual labour for unskilled jobs has been replaced by activities that require skills, scientific knowledge, technical acumen and professional training.
Various external factors influence the outflow and inflow of manpower resources.
At the local level such factors are:
(i) Population density at various distances from the factory or work place;
(ii) Local unemployment level, particularly of the categories which are relevant for the operation of the organisations;
(iii) Availability of part-time labour,
(iv) Current competition for similar categories of manpower from other organisations;
(v) Output from the educational system (general as well as technical);
(vi) Pattern of in-migration and out-migration within the area and between it and
(vii) Transport facilities and communication pattern.
At the corporate level other factors operate, viz.:
(i) Trends in the growth of the working population;
(ii) Government training schemes and systems of technical, vocational, professional, and general education, and their out-turn;
(iii) Impact of social security measures on manpower supply;
(iv) Mobility of the products of the technical, professional and vocational institutions;
(v) Cultural factors and customs, social norms, affecting school leaving age, labour force participation of women, children and young persons.
The personnel manager should have a thorough knowledge of the labour market. Which particular source in the labour market will be tapped will depend upon the policy of a firm, the position of labour supply, the arrangements with labour unions, and Government regulations. However, it is always safe for the personnel manager to be in close liaison with these different sources and use them as and when the need arises.